The NCAA and the business of college athletics

300px-UCLA_bruins_textlogo.svgIn a California federal court this week, “the sports trial of the century” begins. The outcome will likely carry huge ramifications for college athletes and the future of the sports business.

Judge Claudia Wilken, who sits on the U.S. District Court for the Northern District of California, will be asked to determine if the NCAA has violated antitrust law by regulating the ability of football and basketball student-athletes to negotiate the commercial use of their own names, images and likenesses in TV broadcasts and video games.

The lead plaintiff in Ed O’Bannon v. NCAA is a 41-year-old former basketball star for UCLA who led his team to a national championship in 1995.

As the story goes, O’Bannon observed a character in a video game that he identified as himself. Having not given consent for the use of his image or likeness, nor having received compensation for doing so, O’Bannon brought a lawsuit against the association as well as EA Sports and the Collegiate Licensing Company.

EA Sports and CLC reached a $40 million settlement with former players, including O’Bannon, last September. The NCAA, however, is taking its chances in court.

O’Bannon’s lead counsel, Michael Hausfeld, will argue that the NCAA and its constituent members comprise a “cartel” that distorts two key markets: competition among schools for the top recruits, and competition among broadcasters and video game companies for the use of players’ names, images, and likenesses.

By disallowing schools to pay their athletes directly while simultaneously profiting from multi-year, multi-billion dollar deals, plaintiffs say, the NCAA turns those markets anti-competitive at the expense of players and for their own benefit.

Glenn Pomerantz, lead counsel for the NCAA, will take a different view. His team says that amateur rules—that is, the rules governing college athletics, as opposed to professional sports—are vital to the NCAA’s business model by cultivating and sustaining fan interest.

They also say the rules protect athletic competition by preventing wealthy schools from snapping up top talent, while also enabling all schools to devote money to scholarships rather than individual contracts.

O’Bannon and the certified class of current and former players who joined him are not seeking financial compensation for damages. Instead, they’ll look to Judge Wilken for an injunction against the NCAA’s current rules—paving the way for a radical shift in the way the organization conducts business.

Adding electricity to the start of the trial was the sudden announcement of a $20 million settlement between the NCAA and former Arizona State University quarterback Sam Keller. The former athlete had sought class-action damages for the use of players’ names, images and likenesses in video games. However, the settlement is likely to have little or no impact on the O’Bannon trial.

Regardless of who emerges victorious from district court, the losing party is sure to bring its case to the U.S. Court of Appeals for the Ninth Circuit. Once that court renders a decision, the losing party will probably turn to the Supreme Court.

Chances of a high court hearing are low, however. The Supreme Court tends to gravitate to splits among the lower courts—O’Bannon’s lawsuit is the first of its kind, so no disagreement on the issue has developed.

Plus, less than one percent of cases are accepted each term, making the NCAA’s return to the Supreme Court in over two decades less likely than a successful half-court shot.

Nicandro Iannacci is a web strategist at the National Constitution Center.

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